Common total c preferred stock is cumulative

Common Total
(c) Preferred stock is cumulative,
participating $57,778 $32,222 $90,000
The computation for these amounts is as follows:
Preferred Common Total
Dividends in arrears (2 X $16,000) $32,000 $32,000
Current dividend 16,000 16,000
Pro-rata share to common

(5,000 X $50 X 8%) $20,000 20,000
Balance dividend pro-rata 9,778 12,222 22,000 *
$57,778 $32,222 $90,000
*Additional amount available for participation
($90,000 – $32,000 – $16,000 – $20,000) 22,000
Par value of stock that is to participate
Preferred (2,000 X $100) $200,000
Common (5,000 X $50) 250,000 450,000
Rate of participation
$22,000 ÷ $450,000 4.8889%
Participating dividend
Preferred, 4.8889% X $200,000 $ 9,778
Common, 4.8889% X $250,000 12,222
$22,000
EXERCISE 15-12
(a) 6/1 Retained Earnings 8,000,000
Dividends Payable 8,000,000
6/14 No entry on date of record.
6/30 Dividends Payable 8,000,000
Cash 8,000,000
(b) If this were a liquidating dividend, the debit entry on the date of declaration would be to
Additional Paid-in Capital rather than Retained Earnings.
PROBLEM 15-3
HATCH COMPANY
Stockholders’ Equity
December 31, 2018

Capital Stock
Preferred stock, $20 par,
8%, 180,000 shares issued
and outstanding $ 3,600,000
Common stock, $2.50 par,
4,100,000 shares issued,
4,080,000 shares outstanding 10,250,000
Total capital stock
13,850,000
Additional paid-in capital
In excess of par—preferred $ 260,000
In excess of par—common 27,750,000
From treasury stock 10,000
28,020,000
Total paid-in capital
41,870,000
Retained earnings
4,272,000
Total paid-in capital and retained earnings
46,142,000
Less: Treasury stock
(20,000 shares common)
200,000
Total stockholders’ equity $
45,942,000
Supporting balances are indicated in the following T-Accounts.
Preferred Stock

Bal. 3,000,000
1. 600,000
3,600,000
Paid-in Capital in Excess of
Par—Common Stock
Bal. 27,000,000
4. 750,000
27,750,000
Common Stock
Bal. 10,000,000
3. 250,000
10,250,000
Retained Earnings
Bal. 4,500,000
8. 288,000 10. 2,100,000
9. 2,040,000
4,272,000
Paid-in Capital in Excess of Par—
Preferred Stock
Bal. 200,000
2. 60,000
260,000
Treasury Stock
5. 300,000 6. 100,000
200,000
Paid-in Capital from Treasury
Stock
7. 10,000
10,000
1. Jan. 1 30,000 X $20
2. Jan. 1 30,000 X $2
3. Feb. 1 50,000 X $5
4. Feb. 1 50,000 X $15
5. July 1 30,000 X $10
6. Sept. 15 10,000 X $10

7. Sept. 15 10,000 X $1
8. Dec. 31 3,600,000 X 8%
9. Dec. 31 4,080,000* X 50¢
*[(2,000,000 + 50,000) X 2] – 30,000 + 10,000
10. Dec. 31 Net income